The Economy Is Generating More High Wage Jobs - But Does That Matter?

For those who wonder why so many American voters are angry and supporting anyone - like Donald Trump - who blames the problem on 'foreigners' and promises to return the US economy to its mythical 1950s heyday. JL

Lydia DePillis reports in the Washington Post:

Our main labor market challenge is not a lack of high wage jobs; it’s rather the weak or non-existent wage growth in non-college jobs. Less than one-third of American workers ages 25-64 have a four year college degree or higher. After three decades of high and generally rising returns to college education, the employment and earnings opportunities of the other two-thirds of our workforce (i.e., the non-college workers) is (the) main concern.
A couple of weeks ago, some economists from Goldman Sachs came out with a rosy pronouncement: "Millions of new jobs and plenty of good ones," read the headline on a note to investors. High-wage employment appeared to pick up from 2013 to the present, a change from the early years of the economic recovery, which generated a disproportionate number of low-wage jobs.

And you don’t have to just take it from an investment bank. The Department of Labor has run its own numbers, and saw similar growth back in October, rendered in absolute numbers rather than growth rates (which Labor’s Chief Economist Heidi Shierholz says held through the end of 2015 in an analysis the department completed last week).
The green bars in the graph below show changes in actual employment, and the orange line shows what it would have been if the growth had been evenly distributed. Shierholz says the loss of low-wage jobs is likely a result of workers in those categories having their wages bumped up above $10 an hour, as the huge growth in low-wage sectors from 2009-2013 led to competition for people in restaurants and retail, or finding better jobs.

That renewed growth in high-wage jobs, which started to show up in 2014, is typical of recoveries from recessions: Low-wage retail and restaurant jobs come back first, as consumers start to buy small-ticket items and go out to eat again. Later on, the profitability trickles up, leading firms to make more expensive hires. Overall, the trend could be responsible for the small uptick in wages that's become evident in recent months, as well.
So, does that mean the U.S. job market has made a full recovery? Are we basically out of the woods?
Not so fast, economists say.
First of all, the economy is digging out of a big hole. This graph, from a 2014 paper by MIT economist David Autor, shows how in the period between 1999 and 2007 the share of low-wage occupations increased a lot, while middle and high-wage occupations were basically flat. Over the next five years represented by the green line, there was large growth in both low and high-wage occupations, while middle-wage occupations lost ground.

The last two years haven't really fixed that: Overall between 2007 and 2015, low-wage occupations grew as a share of the labor market by 0.6 percent, middle-wage occupations shrank by 4 percent, and high-wage occupations grew by 0.3 percent. And people are still mostly making less money than they were before the recession: Median wages for low and middle-earning occupations sank 1.5 and 1.8 percent respectively, according to a breakdown by the Economic Policy Institute's Dave Cooper.
"We don’t think there’s evidence of any major shifts in the composition of jobs in recent years that’s different from the longer-term trends," Cooper wrote in an email. "And consequently, changes in the composition of the workforce should not be used to explain the broader wage trends – there’s been poor wage growth across the board due to overall weakness in the labor market."
The other problem: There's still a large part of the labor force that's been left out of the healthy growth in recent years, says MIT's Autor, who has done much to establish how middle-wage jobs in fields like manufacturing have disappeared and not been replaced.
"Our main labor market challenge is not a lack of high wage jobs; it’s rather the weak or non-existent wage growth in non-college jobs," Autor wrote in an email. "Less than one-third of American workers ages 25-64 have a four year college degree or higher. After three decades of high and generally rising returns to college education, the employment and earnings opportunities of the other two-thirds of our workforce (i.e., the non-college workers) is my main concern at present."
Think coal miners left unemployed as production declines, or the 2,100 workers at the Carrier plant in Indiana whose jobs are moving to Mexico, or the millions more who've been laid off as automation rendered them unnecessary. Going forward, the Bureau of Labor Statistics projects that the service sector will capture 94.6 percent of the new jobs added through 2024. The bulk of those, in positions like home health aides and medical assistants, make below $35,540 a year.
All of which is to say that, while a recovery can look good on paper, further down on the ground, it may still be leaving some people out.